Google Wants to Make Online Display Ads ‘Sexy’

Google has long dominated Web search, and the advertising it generates. But the company has vowed to build a major business in the parallel market of online display ads, and on Tuesday laid out some predictions about how that business will evolve.

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Search ads tend to be simple text links that pop up next to the results of a query. Display ads are larger, typically appearing on websites as banners, though sometimes spiced up with video or animation.

During a presentation during the IAB advertising conference, Google executives said the medium will become much more engaging. In past years, display ads were “static” and it was “tough to engage Madison Avenue’s most creative minds,” said Barry Salzman, a Google managing director for media. Now “display is bringing ‘sexy’ back.”

In five years, Salzman said 75% of display ads will be “social,” meaning people will be able to comment on them, share them with friends on social networks, or “subscribe” to them, implying that users could sign up to receive notices of when similar ads are available to watch. Google also said 50% of display ad campaigns will include video ads for which advertisers pay based on how many individuals viewed them, and that 50% of ads will use real-time bidding technology that wasn’t previously available.

In addition, Google demonstrated several new technologies including new video ad formats for its YouTube service, which Google calls “TrueView.” The YouTube ad formats, which will roll out later this year, give viewers the option to skip an ad if they don’t want to watch, or to choose from multiple ads the one they want to watch, similar to ad experiences on rival Hulu. Advertisers on YouTube only pay if the user chooses to watch their ad. Other YouTube ad initiatives charge advertisers based on how many users view ad.

“On television, [networks] generally made more money by showing more ads,” said Shishir Mehrotra, a YouTube executive. “Online video will reverse that trend.”

Google also is using technology it obtained from the recent purchase of Teracent to alter the creative elements of an ad in real-time, depending on factors like geographic location, the content of the website and the time of day. For example, a Web user in New York during a rainstorm would see an ad for a new SUV that might reference the time and weather and would appear differently than for a user in Phoenix, where it is sunny.

In addition, Google’s speech from New York was broadcast live in a number of expandable ad units across the web, including on WSJ.com, as part of Google’s attempt to show how it could ad video to so-called rich media display ads.

There’s reason for Google’s interest. In July, Google CEO said in an interview that display advertising would be one of his company’s next $10 billion-plus businesses.

On Tuesday, the Google executives predicted the display ad market would reach $50 billion. By way of comparison, the research firm eMarketer puts U.S. display ad revenue in 2010 at $8.6 billion, up 13% over the prior year.